The Euro (EUR) fell against the Pound (GBP) on Wednesday due to the publication of positive economic data out of the UK but further losses were restrained as a separate report out of the Eurozone showed that the threat of deflation eased in August.
Sterling was able to advance against the majority of its most traded peers after it found support from strong unemployment data and signs that wage growth improved slightly in the second quarter of the year.
According to the Office for National Statistics (ONS), the number of UK citizens claiming unemployment benefits fell by 37,200 in August, beating expectations for a drop of 30,000. July’s figure was also revised to show a drop of 37,400 from the previous reading of 33,600.
The data also showed that the UK’s unemployment rate declined to 6.2% in July, the lowest level seen since December 2008. The figure was better than economist forecasts for a jobless rate of 6.3% and down from the preceding number of 6.4%.
‘The main findings of this release are that employment continued to rise and unemployment continued to fall. These changes continue the general direction of movement since late 2011/early 2012,’ said the ONS in its report.
Average earnings also ticked higher with wages including bonuses rising by 0.6% in the three months leading up to July. The number was better than expectations for a rise of 0.5%. Excluding bonuses wages inched higher by 0.7%, matching forecasts. Despite the rise wage growth remains well below inflation.
The eagerly anticipated Bank of England minutes showed that the same two policy makers, Martin Weale and Ian McCafferty voted in favour of raising interest rates. The MPC however voted unanimously to maintain the banks monthly asset-purchasing programme.
Traders will now be looking nervously to Thursdays Scottish Referendum vote. A yes vote will likely send the Pound tumbling against the Euro and other major peers.
More losses for the Euro were restrained however as data out of the 18-member currency bloc offered support.
Construction output in the region was higher by 0.4% on a year on year, beating economist expectations for a fall of -2.3%.
The annual rate of inflation in the Eurozone was unchanged at 0.4% after Eurostat revised its previous estimate of 0.3%. The rate of inflation remains at its lowest level since October 2009. The report showed that six members of the Eurozone experienced deflation in August.
Against the US Dollar, the Euro was little changed as economists look ahead to the evening’s Federal Reserve Policy meeting. Any signs that the central bank is getting closer to raising interest rates will likely send the USD higher against the EUR.
Update:
The Euro to Pound Sterling (EUR/GBP) exchange rate dropped back below the 0.80 level on Wednesday afternoon as economists increased their bets that Scotland would vote No to independence in Thursday’s referendum vote.
Sterling also received support from positive wage growth, employment and claimant count data.
Against the US Dollar, the Euro inched higher after the ‘Greenback’ came under pressure from data, which showed that consumer prices in the world’s largest economy fell unexpectedly in August. The fall was the first one seen in more than a year.
According to the Labour Department, the Consumer Price Index (CPI) dipped by 0.2% to an annual rate of 1.7%. Economists had been forecasting for the index to stay unchanged at 1.9%.
Euro Exchange Rate News:
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